Nepal moves to implement Ethanol blending in petrol after two decades of debate

KATHMANDU: The government has stepped up efforts to implement a long-discussed policy to blend ethanol into petrol, aiming to introduce a 10 percent ethanol mix as part of energy reform, import substitution, and agricultural industrialization plans.

After nearly two decades of studies, policy drafts, and stalled discussions, the government recently approved the Ethanol Blending Order 2082, signaling a renewed push to operationalize the agenda. The order is expected to be published in the Gazette soon, paving the way for formal implementation.

The policy discussion gained momentum at a program organized Sunday in the capital by the Nepal Economic Journalists Society, where government officials, industry leaders, and consumer advocates debated the opportunities, risks, and execution strategy of ethanol blending in Nepal.

Import Reduction and Economic Impact

Minister for Industry, Commerce and Supplies Anil Kumar Sinha said blending ethanol in petrol could reduce petroleum imports worth around Rs 6 billion annually, helping narrow Nepal’s persistent trade deficit.

He emphasized that the policy has been under discussion for nearly 20 years and has now reached implementation stage after multiple feasibility studies.

According to the minister, the initiative could benefit sugarcane farmers, promote domestic agro-industry, and encourage investment in biofuel production.

“This issue has been studied and discussed for about two decades. The order to blend ethanol in petrol has now been approved and will soon be implemented after Gazette publication,” he said.

However, he acknowledged potential risks, including possible impacts on food security if farmers shift toward cash crops, as well as industrial safety and infrastructure challenges.

Implementation Still One to One-and-a-Half Years Away

Despite policy approval, immediate consumer benefits are unlikely.

Executive Director of Nepal Oil Corporation, Chandika Prasad Bhatt, said the program may take another one to one-and-a-half years to fully implement.

He noted that blending standards, technical specifications, and fuel quality parameters are yet to be finalized.

“Policy approval alone is not enough. Quality standards must be prepared first, and work is underway,” Bhatt said, adding that the government is determined to make the project successful.

Pricing, Standards, and Production Still Pending

According to Joint Secretary Shivaram Pokharel of the Industry Ministry, several critical steps remain before implementation begins.

These include fixing a minimum ethanol price, establishing fuel quality standards, forming a pricing committee, and initiating production tenders.

“This is a new sector for Nepal, so implementation will take time. But we are studying international practices and moving forward,” he said, adding that the order has at least created a guaranteed market signal for producers.

Private Sector Raises Concerns Over Policy Stability

Private investors at the program expressed frustration with past government delays and administrative hurdles.

Chairman of Kian Chemical Industries Ltd., Bed Prasad Kharel, said investors had committed funds years ago based on earlier policy promises but suffered losses due to inconsistent government action.

“We invested Rs 200–220 million to build industrial structures believing in earlier policy commitments. But due to policy vacuum, the project stalled,” Kharel said.

While welcoming the new order as positive, he warned that administrative obstacles must not derail implementation again.

Sugar Producers Say Raw Materials Are Available

Chairman of the Nepal Sugar Producers Association, Shashikant Agrawal, said Nepal already has sufficient raw material for ethanol production.

Molasses, a by-product of sugar production, is currently exported to India and Bangladesh, he said, adding that with clear procedures and price guarantees, domestic ethanol production could begin quickly.

“If the government fixes a clear procedure and price, we can produce ethanol domestically and supply it for blending. This would help reduce the trade deficit,” he said.

Agrawal added that Nepal consumes roughly 250,000 tons of sugar annually while producing about 200,000 tons domestically, and the country could potentially achieve ethanol self-sufficiency within two years.

However, he warned that lack of implementation clarity continues to create uncertainty in the sector.

Consumer Groups Question Quality and Pricing Impact

Consumer rights advocate Madhav Timilsina raised concerns about fuel quality, price transparency, measurement accuracy, and market monitoring.

He questioned whether ethanol blending would actually reduce petrol prices and warned that without effective regulatory oversight, the program could fail to meet its import-substitution goals.

“How will fuel quality be ensured? How will measurement and pricing be regulated? Without clarity on these issues, the program may not succeed,” he said.

Policy Based on Long-Standing Study Recommendations

Secretary at the Office of the Prime Minister and Council of Ministers, Govinda Bahadur Karki, said the ethanol blending decision was not sudden but based on recommendations from multiple commissions and study panels over the years.

He expressed confidence that the policy would continue even after upcoming political transitions, describing it as an economically strategic reform.

The Cabinet had decided last month to introduce a 10 percent ethanol blend in petrol. However, Nepal has yet to start commercial ethanol production, and pricing mechanisms and regulatory frameworks remain incomplete.

As a result, while the policy marks a significant step toward energy diversification and import reduction, its success will largely depend on how quickly Nepal can build production capacity, finalize regulations, and ensure investor confidence.